One of the greatest men of our time is dead. Clayton M. Christensen is gone. Christensen was one of the half a dozen business thinkers who rank above all others. His finest and groundbreaking work, the Innovator’s Dilemma is gem. Christensen was to business thinking what Kobe Bryant who also just died, was to basketball, and then more.
To help celebrate the passage of the great man, following is our review encounter with his greatest work.
Title: The Innovator’s Dilemma; When New Technologies Cause Great Firms To Fail.
Author: Professor Clayton M. Christensen.
Publisher: Harvard Business Review Press, 2000.
Pages: 252. Price: US $35.00/local prices elsewhere.
The Innovator’s Dilemma, will easily rank, not just as one of the great business books, but also as one of the great wisdom books in history. This is especially so if one reads through its business specific thesis as the broad and fungible moral which it is. The lessons therein cuts across large swathes of life and living. It is true the author is dedicatedly concerned with innovation in business, but he is so successful at it that we can read and map the whole world in his grain of business sand.
Of course, a great book is one that exhausts its subject matter in a definitive manner. However, a wisdom book is one that is generative. A wisdom book prompts and gives you the wings to probe further. In other words, a wisdom book points towards the development of the possible, as against being a completion of the extant. To have such two strands of book ideas blended as one is something of a creative bonanza. The author achieves this rarity with this book.
The author, a well regarded Harvard professor, is also a business consultant and have had several stints being a business founder. The fact of this is not superfluous. There is a feeling that some of the insights, if not the sense of urgency of the book, may have come from the author’s real life immersion in business processes. It is this reality of having his fingers dirtied in the real world that gives his reflection an added and sharper edge.
The keys message of the book are two. The first is this. It is that there are large forces at play in the life and business circles of firms. These are the forces of innovation in both the technical and process challenges sense. Implied in this play of innovation forces is that it is as old as history. Since our ancestors first founded businesses, these businesses have been assailed by internally or externally driven innovative competitors. Thus, innovation is as old and as disruptive as the horse drawn cart and as new as the iPhone. In other words, the author is taking on a dynamic that is elemental and that will always be in contention.
For the author, impliedly, innovation is a never ending business circle. And he treats it not as a subject, but as an ever present historic and historical force. He writes: ”Toyota [an innovator], for example, entered the U.S. market with its simple, reliable Corona, establishing a low-end position. Then consistent with inexorable attraction to migrate upmarket… creating a vacuum at the low-end of the market into which entrants such as Saturn and Hyundai have entered.”
The cleverness in his insight is to treat these innovation dynamics more like the elemental forces of physics, than the outsider pull of externalities as economists may call it. While in economics, externalities are outsider forces, they are largely self-contained and can be fought off as a stand-alone blotches. But the point of elemental forces, both in physics and as Christensen tells, is that they fix the boundaries of the possible. The best you can do with them is to understand their inner logic and deploy those. The worst you can do, is to take on them toe-to-toe as corporate irritant foes. Christensen repeats this idea severally in the book. For example he writes: ”by embedding independent organizations those managers harnessed the powerful forces of resource dependence. The CEO of Micropolis fought them, but he won a rare and costly victory.”
The next key message is derived from this. It is the paradox that the logic of a company succeeding is the very logic that will see the same company fail in the subject of innovation. In other words, no company once victorious is granted eternal triumph. In fact, innovations are likely to see her falter and fail.
To prove this, Christensen had to show mastery and innovation himself. Before him, innovation was an un-discriminated bundle. But by this book he has taught us that innovation could more imaginatively be disentangled into two subtypes. They are 1. ”Sustaining Innovation” of which he writes ”What all sustaining technologies have in common is that they improve the performance of established product, along the dimensions of performance that mainstream customers in major markets have historically valued…. most new [sustaining] technologies foster improved product performance”
Of ”Disruptive innovations”… ”disruptive technologies often enable something to be done that previously had been deemed impossible… are innovations that result in ‘worse’ product performance, at least in the near-term. Disruptive technologies bring to the market a very different value proposition than had been available previously. Ironically, in each of the instances studied in this book, it was disruptive technology that precipitated the leading firms’ failure.”
To understand why and how, the author explains: ”Disruptive technologies facilitate the emergence of new markets, and there are no $800 million [mega-sized] emerging markets. But it is precisely when emerging markets are small – when they are least attractive to large companies in search of big chunks of new revenue – that entry into them is so critical.”
And by the lore of established firms missing out on this crucial stage of entry, they routinely clerk in records of corporate failures. In other words, all successful companies are under threat of corporate failure as disruptive technologies invade their markets.
However, Christensen has a line or two on how to survive this invader-force of disruptive innovation. First, is to come to knowledge that the reasons that make a dominant company successful, will militate and dis-incentivize against her in her in emerging markets. Amongst many other factors, Christensen writes:
”Large companies often surrender emerging growth markets because smaller, disruptive companies are actually more capable of pursuing them. Though start-ups lack resources, it doesn’t matter. Their values can embrace small markets, and their cost structures can accommodate lower margins….”
Are there lessons in this book for the CEOs and others? The straight forward answer is plenty. Actually the book should have a permanent place in every CEO’s bookshelf. It should be dipped into every now and again if only to be reminded that disruptive and innovative challenges are next door and are largely unseen. Perhaps his anecdote of Quantum, a dominant technology firm, taking on innovation-invader forces is apt and inspiring. He writes:
”Rather than let them leave unencumbered, however, Quantum’s executives financed and retained 80 percent ownership of this spinoff venture, called Plus Development Corporation, and set the company up in different facilities. It was a completely self-sufficient organization, with its own executive staff and all of the functional capabilities required in an independent company. Plus was extremely successful…. Quantum then purchased the remaining 20 percent of Plus, essentially closed down the old corporation and installed Plus’s executives in Quantum’s most senior positions.”
This is in keeping with the book’s idea that successful corporations are best served by spinning off standalone companies as a strategy to hold leadership grounds in the new markets created by disruptive technologies. In other words, it is not a bankable strategy to fight or contain innovation from within successful companies.
Perhaps, what Christensen is tackling is not exotic. Locally, we have seen this happen but it is that nobody took notice. In the motor transport sector for instance, Peace Mass Transit and God is Good Motors pioneered the use of shuttle buses for long distance travels. This was sufficiently disruptive it disestablished the old ways of commuting via long distance luxury buses. Today, they are leaders in the commuter subsector and this, literally from nowhere.
Generally, the book is well written and full of worthy and inspiring quotes. However it is repetitive somehow. Perhaps this is understandable. It is the work of a professor of business. And he is about a radically new explanation where old reasons have failed. He is thus dedicated to repeat himself just to make us not lose the thread of his idea or logic. It will thus pay well if one read it not as a novel, but to deep in and take a chapter or two at one time.
For greater fun, if not enlightenment, pair ”The Innovator’s Dilemma,” By Professor Clayton M. Christensen with ”The Creative Economy: How People Make Money From Ideas,” by John Howkins, Penguin Publishers. Just to restate.